Inflation report for May 2024 reveals how the U.S. economy is looking now

Some economists have counseled patience. The Fed has kept its federal funds rate, which influences the other interest rates in the economy, at the same level — about 5.5% — since last summer.

Thanks to other external forces, especially the normalizing of supply chains following pandemic disruptions, the prices of many key consumer items have largely stopped climbing, and in some cases — as with airfare, vehicles and many electronics — are now declining.

Today, the bulk of ongoing price increases are in housing, which the BLS tracks in its shelter index. While those costs have declined on an annual basis each month since April 2023, they are still above 5%.

“Stuck is a good word,” said Mark Franceski, managing director at Zelman & Associates, a housing market research and consultancy.

While some so-called spot measures of rents, from groups like CoreLogic and Zillow, are showing price declines in some cities, the BLS survey of shelter costs is designed to capture changes in the value of housing, Franceski said.

The survey has recently come under scrutiny, with critics saying it does not accurately reflect how consumers experience housing costs. For instance, it asks homeowners how much they think they could rent their house for if they decided to do so — an anecdotal data point rather than one rooted in day-to-day spending.

But Franceski said it still holds value. “They’re getting a decent read,” he said of the BLS survey.

Election implications

Even if inflation data were to improve over the next several months, surveys suggest consumers are still catching up to a new, higher-cost environment.

Since the onset of the pandemic in spring 2020, the CPI has climbed a cumulative 22%. It’s one reason why measures of consumer confidence remain below pre-pandemic levels.

Erik Lundh, senior global economist at The Conference Board economic insights group, estimates the amount of inflation that has accumulated since the pandemic is equivalent to the price increases that occurred over a 10-year period following the 2008-09 global financial crisis.

“It takes time for consumers to digest that amount of increase,” he said. “When you stretch it over a decade, memories fade about what you were paying 10 years ago at the grocery store — but not three years ago. So the inflation we have seen is fresher in the mind, and that’s really weighed on them.”

It may also help explain why at least one recent poll found 41% of registered voters better trust Donald Trump, who is running to regain the White House, to handle the economy, versus 37% who favor President Joe Biden — though that gap has narrowed in recent months.

In the meantime, multiple surveys have shown most Americans wrongly believe the U.S. economy is in a recession, despite continuing pay gains in many sectors and a still historically low unemployment rate of 4%.

“Consumers have been pretty consistently gloomy about the outlook over the next 12 months,” Lundh said.

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